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Monday, March 31, 2014

Does Economics Make You a Bad Person?

Economic reasoning often begins with a presumption that people act in a self-interested manner. And so there's been a string of small-scale research over over time about whether studying economics makes people more likely to act in a selfish manner. Adam Grant offers a nice short overview of this research (with links to underlying papers!) for Psychology Today last October, in "Does Studying Economics Breed Greed?"

The especially tough question in this research is how to distinguish between several possibilities: 1) Maybe studying economics changes the extent to which people act selfishly; 2) Maybe studying economics makes people more willing to admit that they might act selfishly, or makes them act more selfishly in small-scale classroom game interactions, but doesn't actually change their real-world behavior; or 3) Maybe people who are more likely to act in their own self-interest, or more likely to admit that they act in their own self-interest, are drawn to economics in the first place.

I won't try to summarize the literature here, especially because Grant already offers such a nice overview, but here are a few samples. A 2012 study by Andrew L. Molinsky, Adam M. Grant, and Joshua D. Margolis in the journal Organizational Behavior and Human Decision Processes (v. 119, pp. 27-37) considers "The bedside manner of homo economicus: How and why priming an economic schema reduces compassion." Here's how Grant describes the study:

"In one experiment, Andy Molinsky, Joshua Margolis, and I recruited presidents, CEOs, partners, VPs, directors, and managers who supervised an average of 140 employees. We randomly assigned them to unscramble 30 sentences, with either neutral phrases like [green tree was a] or economic words like [continues economy growing our]. Then, the executives wrote letters conveying bad news to an employee who was transferred to an undesirable city and disciplining a highly competent employee for being late to meetings because she lacked a car. Independent coders rated their letters for compassion.
Executives who unscrambled sentences with economic words expressed significantly less compassion. There were two factors at play: empathy and unprofessionalism. After thinking about economics, executives felt less empathy—and even when they did empathize, they worried that expressing concern and offering help would be inappropriate."

Of course, a skeptic might object that even if the "priming" with economics terms changes the amount of compassion expressed in a "bad news" letter, the executives would still deliver the bad news when they felt it was necessary.

In a 2011 study published in Academy of Management Learning & Education, Long Wang, Deepak Malhotra, and J. Keith Murnighan carry out various experiments on the topic of "Economics Education and Greed." (10 (4): 643–660). For example, several of their experiments are online surveys in which people in various ways revealed their attitudes about greed. Those who majored in economics, or who read a snippet of economics before answering, were less likely to express attitudes that strongly condemned greed. Of course, a skeptic might point out that such surveys show what people say, but not necessarily what they feel or how they act.

Some of the early studies about how the study of economics might affect its students were published in the Journal of Economic Perspectives (where I've worked as the Managing Editor since the start of the journal in 1987). For example, in the Spring 1993 issue, Robert H. Frank, Thomas Gilovich,

and Dennis T. Regan ask "Does Studying Economics InhibitCooperation?" They present a variety of evidence that raises cause for concern. For exmaple, they present data that economists in academia are more likely to give zero to charity than others. They report the results of surveys in which students are asked what would happen if they were working for a company that paid for nine computers, but accidentally received ten. Do they expect the error would be reported back to the seller, and would they personally report the error? Those who have taken an economics class are less likely to say that the error would be reported, or that they would report it, than students in an astronomy class.

Again, a skeptic might point out that even if economists are less likely to give to charity, this pattern may have been established well before they entered economics. And maybe the economics class is just causing students to be more realistic about whether errors would be reported and more honest in reporting what they would really do, compared with those in other classes.

In a study in the Winter 1996 issue of JEP that Grant doesn't mention in his brief Psychology Today overview, Anthony M. Yezer, Robert S. Goldfarb, and Paul J. Poppen discussed ""Does Studying Economics Discourage Cooperation? Watch What We Do,Not What We Say or How We Play," They carried out a "dropped letter" experiment, in which a letter was left behind in various classrooms around the George Washington University campus, some economics classrooms and some not. The letter was addressed and stamped, but unsealed and with no return address. Inside there was $10 in cash, and a brief note saying that the money was being sent to repay a loan. In their experiment, over half of the letters that were dropped in economics classrooms were mailed in with the cash, compared with less than a third of the letters dropped in noneconomics classrooms. They also argue that substantial parts of the economics curriculum are about mutual benefits from trade, both between individuals and across national borders, and in that sense economics may encourage students to see economic interactions as friendly to decentralized cooperation, rather than as just an arena for clashes of unfettered selfishness.

In a similar spirit, I sometimes argue that many students enter an economics class seeing the world and the economy as fundamentally a zero-sum game, where anyone who benefits must do so at the expense of someone else. Learning about how division of labor and voluntary exchange at least has the possibility of being a positive-sum win-win game makes them more likely to consider the possibility of benefiting both themselves and others. Maybe there are some unreconstructed business schools which do teach that "greed is good." But all the economics curricula with which I'm familiar is painstaking about explaining the situations and conditions in which the interactions of self-interested parties is likely to lead to positive outcomes like free choice and efficiency, and also the situations and conditions in which it can lead to pollution, unemployment, inequality, and poverty.

My own sense is everyone plays many roles and wears many hats. A surgeon who cuts into people all day would never dream of getting into a knife fight on the way home. An athlete who competes ferociously all week goes to church and volunteers to help handicapped children during off hours. A parent fights grimly over the appropriate annual marketing plan, and then goes home and hugs their children and takes dinner over to the neighbors who just had a baby. Some economic behaviors certainly shouldn't be generalized to the rest of life, and it's possible to set up situations with questionnaires and little classroom experiments where the boundaries can become blurred. But there's not much reason to believe that Darwinian biologists practice survival of the fittest in their spare time, nor that sociologists give up on personal responsibility because everything is society's fault, nor that lawyers go home and argue over fine print with their families.

It's worth remembering that Adam Smith, the intellectual godfather of economics, reflected on selfishness and economics at the start of his first great work, The Moral Sentiments, published in 1759. The opening words of the book are: "How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it." And later in the same chapter: "And hence it is, that to feel much for others and little for ourselves, that to restrain our selfish, and to indulge our benevolent affections, constitutes the perfection of human nature; and can alone produce among mankind that harmony of sentiments and passions in which consists their whole grace and propriety." Smith saw no contradiction in thinking about people as containing both selfishness and "benevolent affections," and most people, even economists, seek a comfortable balance between the two depending on the situation and context.